Future Value of an Annuity

Find the future value of the following annuities. The first payment in these annuities is made at the end of Year 1, so they are ordinary annuities. (Notes: If you are using a financial calculator, you can enter the known values and then press the appropriate key to find the unknown variable. Then, without clearing the TVM register, you can "override" the variable that changes by simply entering a new value for it and then pressing the key for the unknown variable to obtain the second answer. This procedure can be used in many situations, to see how changes in input variables affect the output variable. Also, note that you can leave values in the TVM register, switch to Begin Mode, press FV, and find the FV of the annuity due.) Do not round intermediate calculations. Round your answers to the nearest cent.

1. $200 per year for 10 years at 8%.

   $   

2. $100 per year for 5 years at 4%.

   $   

3. $200 per year for 5 years at 0%.

   $   

4. Now rework parts a, b, and c assuming that payments are made at the beginning of each year; that is, they are annuities due.

   Future value of $200 per year for 10 years at 8%: $   

   Future value of $100 per year for 5 years at 4%: $   

   Future value of $200 per year for 5 years at 0%: $   

The shape of the distribution of the time required to get an oil change at a 20-minute oil-change facility is unknown.​ However, records indicate that the mean time is 21.1 minutes​, and the standard deviation is 4.9 minutes. Complete parts ​(a) through (c).

​(a) To compute probabilities regarding the sample mean using the normal​ model, what size sample would be​ required?

A. The normal model cannot be used if the shape of the distribution is unknown.

B. The sample size needs to be greater than or equal to 30.

C. Any sample size could be used.

D. The sample size needs to be less than or equal to 30.

​(b) What is the probability that a random sample of n=40 oil changes results in a sample mean time less than 20 minutes?

The probability is approximately ______

(Round to four decimal places as​ needed.)

​(c) Suppose the manager agrees to pay each employee a​ $50 bonus if they meet a certain goal. On a typical​ Saturday, the​ oil-change facility will perform 40 oil changes between 10 A.M. and 12 P.M. Treating this as a random​ sample, there would be a​ 10% chance of the mean​ oil-change time being at or below what​ value? This will be the goal established by the manager.

There is a​ 10% chance of being at or below a mean​ oil-change time of _____ minutes.

Solano Company has sales of $760,000, cost of goods sold of $500,000, other operating expenses of $40,000, average invested assets of $2,250,000, and a hurdle rate of 11 percent.

1. Determine Solano’s return on investment (ROI), investment turnover, profit margin, and residual income. (Do not round your intermediate calculations. Enter your ROI and Profit Margin percentage answer to the nearest 2 decimal places, (i.e., 0.1234 should be entered as 12.34%). Round your Investment Turnover answer to 4 decimal places.)

2. Several possible changes that Solano could face in the upcoming year follow. Determine each scenario’s impact on Solano’s ROI and residual income. (Note: Treat each scenario independently.) (Enter your ROI percentage answers to 2 decimal places, (i.e., 0.1234 should be entered as 12.34%.))

   a. Company sales and cost of goods sold increase by 40 percent. (Find ROI and Residual income)

  b. Operating expenses decrease by $11,000.   (Find ROI and Residual income)

   c. Operating expenses increase by 20 percent. (Find ROI and Residual income)
  d. Average invested assets increase by $430,000. (Find ROI and Residual income)

  e. Solano changes its hurdle rate to 17 percent. (Find ROI and Residual income)

a) At the supermarket, milk costs $2 per quart while cereal costs $5 per box.

1. In a diagram, measuring quarts of milk along the horizontal axis, draw the budget constraint of a consumer with an overall cash budget of $20.

2. In the diagram, illustrate how the consumer’s budget constraint changes if there is a two-for-one sale on cereal.

3. In the diagram, illustrate how the consumer’s budget constraint changes if the two-for-one sale on cereal applies only to the first 4 boxes.

b) A high-school student has a monthly budget of $80 to spend on music and burritos. Burritos cost $8 each, while songs are free after paying the Spotify monthly fee of $9.99.

1. In a diagram, measuring songs along the horizontal axis, draw the high-school student’s budget constraint.

c) A family has an yearly income of $50,000 to spend on the kids’ education or on all other goods.

1. In a diagram measuring dollars spent on education along the horizontal axis and dollars spent on all other goods along the vertical axis, draw the family’s budget constraint.

2. In your diagram, draw the family’s budget constraint if the family must pay a 10% income tax but receives a $5,000 school voucher.

The menu cost reasoning for sticky prices includes which of the following concepts

Using the CPI data from 1988-2009, the category of consumer goods that changes prices most frequently is

More durable goods tend to change prices

A study from the Billion Prices Projects studied goods that are sold both in-store by Wal-Mart and online by Amazon. The study found that

We are evaluating a project that costs $864,000, has an eight-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 71,000 units per year. Price per unit is $49, variable cost per unit is $33, and fixed costs are $765,000 per year. The tax rate is 35%, and we require a 10% return on this project.

a-1. Calculate the accounting break-even point. (Round the final answer to 2 decimal places.)

Break even point             units

a-2. What is the degree of operating leverage at the accounting break-even point? (Round the final answer to 3 decimal places.)

DOL            

b-1. Calculate the base-case cash flow and NPV. (Round the final NPV answers to 2 decimal places. Omit $ sign in your response.)

b-2. What is the sensitivity of NPV to changes in the sales figure? (Do not round intermediate calculations. Round the final answer to 3 decimal places. Omit $ sign in your response.)

ΔNPV/ΔQ           $

c. What is the sensitivity of OCF to changes in the variable cost figure? (Negative answers should be indicated by a minus sign. Omit $ sign in your response.)

ΔOCF/ΔVC           $

1. Conduct an interview with the healthcare professional selected in your Interview Assignment.

• What is your healthcare profession? How long have you worked in this field? In what kind of facility do you practice?

• How racially, ethnically, religiously, or sexually diverse is the community your facility serves?

• How racially, ethnically, religiously, or sexually diverse is the staff at your facility?

• What changes– increases or decreases in specific populations -- have you observed in the workplace with patients and staff over time?

• If there has been an increase in diversity, what changes, if any, has your facility made to accommodate this diversity, such as diversity training, providing interpretation services, etc.?

• Describe an experience you have participated in, observed, or heard about in which cultural or other differences have caused problems for patients and/or staff.

• What factors came into play (such as stereotyping, prejudice, assumptions, etc.) and what was the outcome?

• In your view, how well was this situation handled?

• If faced with a similar scenario, what, if anything, would you change about how it was handled? If you would not change anything, what advice would you give to another healthcare professional else facing the same kind of situation?

• Have your personal attitudes towards diversity changed over time? If so, how have they changed? If not, why?

PDQ Repairs has 200 auto-maintenance service outlets nationwide. It performs primarily two lines of service: oil changes and brake repair. Oil change–related services represent 60% of its sales and provide a contribution margin ratio of 15%. Brake repair represents 40% of its sales and provides a 40% contribution margin ratio. The company’s fixed costs are $15,680,000 (that is, $78,400 per service outlet).

(a)

Correct answer iconYour answer is correct.

Calculate the dollar amount of each type of service that the company must provide in order to break even. (Use Weighted-Average Contribution Margin Ratio rounded to 2 decimal places e.g. 0.25 and round final answers to 0 decimal places, e.g. 2,510.)

eTextbook and Media

Attempts: 1 of 5 used

(b)

The company has a desired net income of $51,000 per service outlet. What is the dollar amount of each type of service that must be performed by each service outlet to meet its target net income per outlet? (Use Weighted-Average Contribution Margin Ratio rounded to 2 decimal places e.g. 0.25 and round final answers to 0 decimal places, e.g. 2,510.)

The shape of the distribution of the time required to get an oil change at a 20 ​-minute ​oil-change facility is unknown.​ However, records indicate that the mean time is 21.1 minutes ​, and the standard deviation is 4.8 minutes . Complete parts ​(a) through ​(c). ​(a) To compute probabilities regarding the sample mean using the normal​ model, what size sample would be​ required? A. The sample size needs to be less than or equal to 30. B. The sample size needs to be greater than or equal to 30. C. Any sample size could be used. D. The normal model cannot be used if the shape of the distribution is unknown. ​(b) What is the probability that a random sample of nequals 40 oil changes results in a sample mean time less than 20 ​minutes? The probability is approximately nothing . ​(Round to four decimal places as​ needed.) ​(c) Suppose the manager agrees to pay each employee a​ $50 bonus if they meet a certain goal. On a typical​ Saturday, the​ oil-change facility will perform 40 oil changes between 10 A.M. and 12 P.M. Treating this as a random​ sample, there would be a​ 10% chance of the mean​ oil-change time being at or below what​ value? This will be the goal established by the manager. There is a​ 10% chance of being at or below a mean​ oil-change time of nothing minutes

Grab a blank sheet of paper and try some inflation analysis on your own. Take a picture or scan your sheet, and upload it after you are finished. This contributes to your participation grade in the class.

1. Because inflation increased by only 1.7% in 2008, the American Association of Retired Persons comments that this is “an unfortunate side effect of inflation, since Social Security payments, which are indexed to inflation, will increase by only 1.7% in 2008.” Comment on whether this is an “unfortunate side effect of inflation” or not.
2. The Federal Reserve Bank (Fed) can impact the economy through changes in the Federal funds rate, because changes in this interest rate will change all interest rates throughout the economy. The Federal funds rate was constant at 5.25% from 1996–1998, a time of falling inflation. What impact did this have on real interest rates during this time? What was likely to happen to investment spending?
3. “Traveling in Turkey is much cheaper now than it was 10 years ago,” says a friend. "Ten years ago, a dollar bought 1,000 lira; this year, a dollar buys 1,500 lira.” Total inflation over this period was 25% in the United States and 100% in Turkey. Is your friend right or wrong—has it become more or less expensive to travel in Turkey?